The first time you saw a multi-image promotional vehicle on the road, you may have been fascinated with the light-up, changing ads. The impression is so effective, that many motorists can recall the names of specific advertisers long after the ad campaign ends. But for some, seeing an ad truck represents the spark of a new business venture. You’re probably reading this because you’ve experienced that.
Building a contact list full of satisfied advertising clients is challenging under the best of conditions. But this post is not about building a thick portfolio of customers quickly. It’s about launching a profitable mobile advertising business with just one great client relationship. World domination comes later.
Pigs get fat
If an ad is designed well, and a mobile advertising company does its job displaying the ad in high traffic areas, it will deliver results for the client. When their initial investment pays off, it’s natural for a client to want more of a good thing. They’ll ask, “that ad we ran on your truck worked so well, we’d like you to quote all the ad space next time.” It doesn’t take a sales training expert to tell you that this is a clear buying signal from your customer.
No problem. You just get out your rate card or calculator. “Let’s see, last time, you paid $400 a week for 13 weeks for one of the side ads. The truck can display at least a dozen ads… (long pause, calculator keys clicking) … that comes out to just under $250,000 with an exclusive annual contract, and we’ll even toss in production for free.”
Hogs get slaughtered
We’re aware of many dedicated advertising vehicle owners who pitched that deal but don’t know a single one who closed it. As they say, pigs get fat, hogs get slaughtered. If you make that pitch to your client, the next call they’ll make might be to us, to buy their own truck.
A car dealer will gladly spend $250,000 a year on TV ads, and a similar amount or more to buy newspaper advertising. But you can’t buy your own TV station or newspaper for two-fifty large. A single billboard in many cities costs over $5,000 a month. A page in the Atlanta Journal-Constitution’s Access Atlanta magazine costs over $15,000 and appears only once. It doesn’t matter. You still can’t publish your own magazine for $15,000. An advertiser that gets good results with your mobile advertising at $200 – $700 per week (typical rates) knows that they can’t buy their own truck, hire drivers, deal with maintenance, and cover their overhead for that price.
A brand new Spark truck costs at least $90,000, usually more. Now how much was that quote for all the ad space? Hogs get slaughtered.
Clients want high visibility and the other benefits that your mobile advertising company can provide. But they don’t want to feel like they’re paying so much that they could do it for a lot less on their own.
How to win with a single client
The yearly operating cost of owning and operating an ad truck ranges between $46,000 (operated 20 hours a week) and $83,000 (operated 50 hours a week). Hold on to that number.
Forbes published an article that tracked the gross profit margin of 333 companies in six industry sectors. The average gross margin, or the percentage of profit realized before items like fixed costs and interest expense are considered, was 39.1%. If you had a client that guaranteed you a gross profit margin of 40% would you do business with them?
Here’s the formula.
- Develop a mobile advertising proposal that includes all the ad space on a truck, and an optional custom wrap of the vehicle, all dedicated to one client.
- The client chooses whether they want just one or two ads on each side or ten different ads on each side. It’s their space.
- Client may approve specific driving routes, or request special routes or parked locations.
- Customer pays all design charges, printing, and installation charges at the actual cost.
- Ad truck owner agrees to operate the vehicle 5 days a week for 4 hours per day during the busiest traffic periods.
- Client may request GPS proof of performance reports to guarantee that the advertising was delivered as agreed.
- Client must commit to an annual contract, preferably longer.
- Rate does not include operation at special events, but those are available as needed at an extra cost.
- Extra hours of coverage are available for an additional charge, during special seasons.
- $7,500 per month. It totals $90,000 per year. Undeniably a far cry from the $250,000 price quote from our earlier calculator exercise.
- Assuming that the client selects a series of four different ads on all four sides, this program is priced at just $28.85 per ad (per day).
Here’s how the math breaks down:
Monthly advertising revenue: $7500
- Truck payment: $2000 (60 month financing on a $90,000 truck, nothing down)
- Insurance: $300 (ranges from $150 to $500)
- Drivers Payroll: $1125 (20 hours a week, $8/hr pay, $5/hr taxes & benefits)
- Fuel: $606 (80 miles per day, 10 MPG, $3.50 per gallon)
- Maintenance: $150 (oil changes, tires, brakes)
- GPS service charge: $30
Total of all monthly expenses: $4211
Gross monthly profit: $3,289
A gross margin ratio of 44% results from this plan. (Gross margin = gross profit divided by gross revenue). It’s important to note that even if your customer learns how much the trucks cost (easy to find out), and can piece together your overhead, your profit margin is reasonable, respectable, and probably similar to what they might charge in their own business.
Some may argue that this plan does not represent the true value of ad space on a dedicated mobile advertising vehicle. We agree that mobile advertising has tremendous value — it’s what we do. It’s OK if you choose to stick to your rate card for the individual ads when a client asks you to price them a program for a dedicated truck. You won’t get the contract, but you’ll still have your principles.
A Win-Win formula
You won’t get rich on the $39,000 of annual gross profit you earn from one truck with this deal. But here’s what you will get:
- A very satisfied customer that is getting remarkable results from his advertising investment with you
- A long term client relationship
- A great testimonial from your client
- Increased credibility for your new business
- Ongoing visibility and branding for your business
- A complete sell-out of available advertising inventory
- Guaranteed profitability
- Increased awareness of the availability and effectiveness of mobile advertising in your city.
All of this can happen with just one successful client relationship. It’s not the only way to achieve success with a promotional vehicle, but it’s a business model we like very much.